Costs to Society Will Equal Costs to a Private Firm

question 131

Multiple Choice

Costs to society will equal costs to a private firm when

• A)the firm misallocates resources in its market.
• B)third parties bear some of the costs of producing the firm's product.
• C)harmful externalities occur in the firm's market.
• D)no externalities occur as the firm produces its product.
• E)beneficial externalities occur in the firm's market.

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Definitions:

Business Risk

encompasses the potential for a firm's operational or financial performance to suffer due to internal or external factors, impacting profitability and viability.

Absolute Priority Rule

A principle in bankruptcy proceedings that senior creditors are paid before junior creditors and equity holders.

Bankruptcy Proceeding

A legal process involving a person or business that is unable to repay outstanding debts, seeking relief through the court's protection.

Financial Leverage

The application of borrowed resources to escalate the anticipated yield of an investment.